The CFPB recently released a File Format Verification Tool for 2018 Home Mortgage Disclosure Act (HMDA) data. As we reported, in October 2015, the CFPB adopted significant changes to the HMDA rules that significantly expanded the amount of information that must be collected and reported. Calendar year 2018 is the first year in which the expanded data must be collected.

The Tool can be used by HMDA filers to test whether their HMDA data file meets the following formatting requirements: (1) whether the file is in the pipe-delimited format, (2) whether the file has the proper number of data fields, and (3) whether the file has data fields that are formatted as integers, when applicable. The Tool cannot be used to file HMDA data. The CFPB advises that there are no login requirements to use the Tool, the Tool will not log identifying information about users or the files that they test using the Tool, and no federal agency will receive or be able to view the files that users test using the Tool.

On July 31, 2018, the day that the National Flood Insurance Program was set to expire, the United States Senate voted 86 to 12 to reauthorize the program through November 30, 2018.  The action follows an earlier reauthorization of the program through the same date by a 336 to 52 vote in the United States House of Representatives.  President Trump signed the reauthorization, which simply kicks the can down the road to just after the mid-term elections, and falls far short of the more permanent resolution to the flood insurance program sought by the mortgage industry.

The Consumer Financial Protection Bureau (CFPB) recently issued a statement regarding the partial exemption from Home Mortgage Disclosure Act (HMDA) reporting requirements for certain lower mortgage volume depository institution lenders that was adopted in the Economic Growth, Regulatory Relief, and Consumer Protection Act (Act).

As we reported previously, the Act exempts depository institutions and credit unions from the new reporting categories added by Dodd-Frank and the HMDA rule adopted by the CFPB with regard to (1) closed-end loans, if the institution or credit union originated fewer than 500 such loans in each of the preceding two calendar years, and (2) home equity lines of credit (HELOCs), if the institution or credit union originated fewer than 500 HELOCs in each of the preceding two calendar years. The HELOC change will not initially affect reporting because, for 2018 and 2019, the threshold to report HELOCs is 500 transactions in each of the preceding two calendar years under a temporary CFPB rule.

The Act’s partial exemption from reporting the new HMDA data does not apply if the institution received a rating of “needs to improve record of meeting community credit needs” during each of its two most recent Community Reinvestment Act (CRA) examinations, or “substantial noncompliance in meeting community credit needs” on its most recent CRA examination.

The CFPB advises in its recent statement that it expects later this summer to provide further guidance on the applicability of the partial exemption to HMDA data collected in 2018. The CFPB also advises that the partial exemption will not affect the format of 2018 Loan Application Registers (LARs) and that:

  • LARs will be formatted according to the previously-released 2018 Filing Instructions Guide for HMDA Data Collected in 2018 (2018 FIG).
  • If an institution does not report information for a certain data field due to the partial exemption, the institution will enter an exemption code for the field specified in a revised 2018 FIG that the CFPB expects to release later this summer.
  • All LARs will be submitted to the same HMDA Platform.

The CFPB also notes that a beta version of the HMDA Platform for submission of data collected in 2018 will be available later this year for filers to test.

In Financial Institution Letter FIL-36-2018 and in OCC Bulletin 2018-19 the Federal Deposit Insurance Corporation and Office of the Comptroller of the Currency, respectively, issued similar guidance to institutions.

The CFPB recently issued revised TILA/RESPA Integrated Disclosure (TRID) rule guides to reflect the adoption of an amendment to the rule to fix the so-called “black hole” issue.  As we reported previously, the amendment will permit the use of an initial or revised Closing Disclosure to reset tolerances without regard to the timing of when before consummation the creditor learns of a change that causes one or more fees to increase.  The amendment will apply to transactions in process as of June 1, 2018 regardless of when the loan application was received, but the amendment may not be applied retroactively.

The CFPB updated both versions of the Small Entity Compliance Guide and the Guide to Forms.  The reason there are two versions of each guide is to account for the TRID rule amendments adopted last summer that became effective on October 10, 2017, but have a mandatory compliance date of October 1, 2018.  While both versions of each guide now reflect the 2018 TRID rule amendment, one version of each guide does not reflect the 2017 amendments and one version of each guide reflects the 2017 amendments.

The U.S. Department of Housing and Urban Development (HUD) recently announced that it will “formally seek the public’s comment on whether its 2013 Disparate Impact Regulation is consistent with the 2015 U.S. Supreme Court ruling in Texas Department of Housing and Community Affairs v. Inclusive Communities Project, Inc.

As we reported previously, the regulation provides that liability may be established under the Fair Housing Act (FHA) based on a practice’s discriminatory effect (i.e., disparate impact) even if the practice was not motivated by a discriminatory intent, and that a challenged practice may still be lawful if supported by a legally sufficient justification.  Under the regulation a practice has a discriminatory effect where it actually or predictably results in a disparate impact on a group of persons or creates, increases, reinforces, or perpetuates segregated housing patterns because of race, color, religion, sex, handicap, familial status, or national origin.  The regulation also addresses what constitutes a legally sufficient justification for a practice, and the burdens of proof of the parties in a case asserting that a practice has a discriminatory effect under the FHA.

While the Supreme Court held in its Inclusive Communities Project opinion that disparate impact claims may be brought under the FHA, it also set forth limitations on such claims that “are necessary to protect potential defendants against abusive disparate impact claims.”  In particular, the Supreme Court indicated that a disparate impact claim based upon a statistical disparity “must fail if the plaintiff cannot point to a defendant’s policy or policies causing that disparity” and that a “robust causality requirement” ensures that a mere racial imbalance, standing alone, does not establish a prima facie case of disparate impact, thereby protecting defendants “from being held liable for racial disparities they did not create.”  Significantly, while the Inclusive Communities Project opinion held that liability may be established under the FHA based on disparate impact, the disparate impact claim against the Texas Department of Housing and Community Affairs was later dismissed by the District Court based on the limitations on such impact claims prescribed by the Supreme Court in its opinion.

We have previously reported on a challenge to the HUD regulation by the American Insurance Association and National Association of Mutual Insurance Companies in the federal district court for the District of Columbia.  The trade associations assert that the regulation is not consistent with the limitations on disparate impact claims set forth by the Supreme Court its Inclusive Communities Project opinion.  A status conference was held on May 10, 2018, and HUD filed a notice with the court advising of its intent to solicit comment on the regulation.  The upcoming HUD request for comment will provide the opportunity for the mortgage industry and other interested parties to address whether the regulation reflects the limitations set forth by the Supreme Court and other concerns with the regulation.

We will report on the HUD request for comment once it is released, and hold a webinar on the request following its release.

As we reported previously, the CFPB recently adopted a long-awaited amendment to the TILA/RESPA Integrated Disclosure (TRID) rule that fixes the so-called black hole issue.

The amendment was published in the May 2, 2018 Federal Register and will become effective on June 1, 2018.  The CFPB notes in the supplementary information to the amendment that “[o]nce the final rule becomes effective, the ability to reset tolerances prior to consummation for a given transaction will not be limited by when the application was received.”  Thus, as of June 1, 2018 the flexibility created by the amendment regarding the use of a Closing Disclosure to reset tolerances will be available for both loan applications that are in process at the time, as well as loan applications made on and after such date.  However, the CFPB also made clear that the amendment may not be applied retroactively.

The CFPB, which is now referring to itself as the “Bureau of Consumer Financial Protection,” published the long-awaited final rule to address the so-called “black hole” issue under the TILA/RESPA Integrated Disclosure (TRID) rule.  The CFPB also issued an Executive Summary of the final rule.  The final rule will become effective 30 days after publication in the Federal Register.

Under the TRID rule, a Loan Estimate is the disclosure primarily used to reset tolerances. Because the final revised Loan Estimate must be received by the consumer no later than four business days before consummation, the Commentary to the TRID rule includes a provision under which a creditor may use a Closing Disclosure to reset tolerances if “there are less than four business days between the time” a revised Loan Estimate would need to be provided and consummation.  Because of the four-business-day timing element, in various cases when a creditor learns of a change, the creditor is not able to use a Closing Disclosure to reset tolerances.  This situation is what the industry termed the “black hole.”  The industry repeatedly asked the CFPB to address the black hole issue.  As previously reported in our Mortgage Banking Update, when the CFPB finalized various amendments to the TRID rule last summer, it punted on a prior proposal to address the black hole issue and proposed another rule to address the issue.  The CFPB has now finalized the second proposal.

In the final rule the CFPB removes the four business day timing element, and makes clear that either an initial or a revised Closing Disclosure can be used to reset tolerances.  Consistent with the requirements for the Loan Estimate, when the TRID rule permits a creditor to use a Closing Disclosure to revise expenses, the creditor must provide the Closing Disclosure within three business days of receiving information sufficient to establish that a changed circumstance or other event triggering a change has occurred.

When proposing the amendment last summer, the CFPB requested comments on whether it should impose additional limits on the ability of a creditor to reset tolerances with a Closing Disclosure, such as allowing a reset of tolerances only in certain of the circumstances currently permitted by the TRID rule.  The CFPB decided not to impose additional limits.

In notices published in today’s Federal Register, the CFPB adjusted the thresholds of the asset-size exemptions for collecting HMDA data and establishing an escrow account for certain mortgage loans under TILA.

Pursuant to Regulation C, which implements HMDA, depository institutions with assets below an annually adjusted threshold are exempt from HMDA data collection requirements.  In its notice, the CFPB increased the 2017 threshold of $44 million to $45 million for 2018.  Thus, depository institutions with assets of $45 million or less as of  December 31, 2017 will be exempt from collecting HMDA data in 2018.  (An institution’s exemption from collecting data in 2018 does not affect its duty to report data it was required to collect in 2017.)

Regulation Z, which implements TILA, requires creditors to establish an escrow account to pay property taxes and insurance premiums for certain first-lien higher-priced mortgages.  The rule contains an exemption for creditors that operate predominantly in rural or underserved areas that meet certain other criteria, including an annually adjusted asset-size threshold.  In its notice, the CFPB increased the 2017 threshold from $2.069 billion to $2.112 billion for 2018.  Thus, loans made by creditors with assets of less than $2.112 billion on December 31, 2017 that operate predominantly in rural or underserved areas and meet the other exemption criteria will be exempt in 2018 from the TILA escrow account requirement for higher-priced mortgage loans.  The adjustment will increase the similar Regulation Z threshold for small-creditor portfolio and balloon-payment qualified mortgages.

The Consumer Financial Protection Bureau (CFPB) recently posted on its website updated versions of guidance in connection with the revisions to the Home Mortgage Disclosure Act (HMDA) rules that become effective on January 1, 2018.

The CFPB updated the key dates timeline, 2018 HMDA institutional coverage chart and 2018 HMDA transactional coverage chart to reflect the temporary increase in the threshold to report home equity lines of credit (HELOCs). In the original version of the revised HMDA rules, an institution that made at least 100 HELOCs in each of the prior two years would need to report HELOCs for the current reporting year.  For example, an institution that made at least 100 HELOCs in each of 2016 and 2017 would have to collect and report data on HELOCs for 2018.  As previously reported, the CFPB temporarily increased the threshold from 100 to 500 HELOCs for 2018 and 2019, and will assess the appropriate reporting threshold to be implemented in 2020.